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Tanking company Scorpio Tankers (NYSE:STNG) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 16.2% year on year to $380.7 million. It made a non-GAAP profit of $3.60 per share, improving from its profit of $2.41 per share in the same quarter last year.
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Scorpio Tankers (STNG) Q2 CY2024 Highlights:
- Revenue: $380.7 million vs analyst estimates of $372.4 million (2.2% beat)
- EPS (non-GAAP): $3.60 vs analyst estimates of $3.54 (1.6% beat)
- Gross Margin (GAAP): 77.3%, up from 75.4% in the same quarter last year
- Free Cash Flow of $258.8 million, up 22.3% from the previous quarter
- Market Capitalization: $3.82 billion
Operating one of the youngest fleets in the industry, Scorpio Tankers (NYSE: STNG) is an international provider of marine transportation services, specializing in the shipment of refined petroleum.
Marine TransportationThe growth of e-commerce and global trade continues to drive demand for shipping services, presenting opportunities for marine transportation companies. While ocean freight is more fuel efficient and therefore cheaper than its air and ground counterparts, it results in slower delivery times, presenting a trade off. To improve transit speeds, the industry continues to invest in digitization to optimize fleets and routes. However, marine transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins. Geopolitical tensions can also affect access to trade routes, and if certain countries are banned from using passageways like the Panama Canal, costs can spiral out of control.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Thankfully, Scorpio Tankers's 17.2% annualized revenue growth over the last five years was incredible. This is a great starting point for our analysis because it shows Scorpio Tankers's offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Scorpio Tankers's annualized revenue growth of 30.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.
This quarter, Scorpio Tankers reported robust year-on-year revenue growth of 16.2%, and its $380.7 million of revenue exceeded Wall Street's estimates by 2.2%. Looking ahead, Wall Street expects revenue to decline 11.3% over the next 12 months, a deceleration from this quarter.
Operating MarginScorpio Tankers has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 41.2%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Analyzing the trend in its profitability, Scorpio Tankers's annual operating margin rose by 22.7 percentage points over the last five years, as its sales growth gave it immense operating leverage.
This quarter, Scorpio Tankers generated an operating profit margin of 66.7%, up 14.5 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Scorpio Tankers's full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it's at an inflection point.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. Scorpio Tankers's EPS grew at an astounding 401% compounded annual growth rate over the last two years, higher than its 30.4% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into Scorpio Tankers's quality of earnings can give us a better understanding of its performance. Scorpio Tankers's operating margin has expanded 6.5 percentage points over the last two years while its share count has shrunk 18.7%. Improving profitability and share buybacks are positive signs for shareholders as they juice EPS growth relative to revenue growth.
In Q2, Scorpio Tankers reported EPS at $3.60, up from $2.41 in the same quarter last year. This print beat analysts' estimates by 1.6%. Over the next 12 months, Wall Street expects Scorpio Tankers to perform poorly. Analysts are projecting its EPS of $12.23 in the last year to shrink by 10.4% to $10.96.
Key Takeaways from Scorpio Tankers's Q2 Results We enjoyed seeing Scorpio Tankers exceed analysts' revenue and EPS expectations this quarter. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 4% to $77.48 immediately after reporting.
